According to the Insurance Bureau of Canada, the claims frequency rate in Ontario feel to 12% in 2003, down from 27% in 1993.

Insurance Bureau of Canada's Ontario Vice-President Mark Yakabuski confirmed a 30% drop in collision repair claims in the past 18 moths, and a 20% drop in home insurance claims- but said this trend is now reversing itself.

John Norris, Executive Director of the Hamilton District Autobody Repair Association (HARA) says shops he's talked to have seen their business fall by 30% to 47%. Some have had to lay off staff.

Although business is down, shops have been hit with 30%-40% hikes in commercial insurance, further eroding profitability.

Norris points out that although insurance profits have rebounded, insurers haven't spread the wealth by raising the rates they pay body shops.

Don Teevens of Hawley Collision Centre in Mississauga has experienced a 50% drop in insurance-paid repairs.

"About 90% of the people who come into my shop say they don't want to go through insurance," said Teevens. "They are literally petrified. Some are afraid to give you their name."

Teevens estimates he's fixing about 25% more cars than last year, but making less money because he's doing more minor repairs and fewer major insurance claims.

However, he's seen people pay $7,000 out of their own pocket for a repair to avoid a big rate hike.

"Even if they finance the $7,000 on a line of credit they figure it's better than seeing their premium go up by 31%," notes Teevens.

High auto insurance rates are also causing car sales to stall. For the first ten months of the year, new vehicle sales in Canada are down 4.9% compared to 2003, despite low financing rates and hefty incentives by automakers.

Auto analyst Dennis DesRosiers has cited insurance affordability-along with high prices-as factors pulling sales down.

"It's had a very, very negative effect on us," said Hugh Brennan, owner of Brennan's Dixie Chrysler in Mississauga.

"We're seeing cases where a person's car payment is $300 a month, but by the time they add in gas and insurance, it's up to $1000 per month."

(Courtesy Toronto Sun)

(see headlines)

ING TO ACQUIRE ALLIANZ OF CANADA
ALLIANZ TO KEEP ALLIANZ GLOBAL RISKS (AGR) IN CANADA

October 8, 2004

ING Group and Allianz Group announced today that ING Canada has concluded a definitive share purchase agreement for the acquisition of Allianz's property and casualty (P&C) insurance operations in Canada.

Under the terms of the agreement, ING will acquire Allianz of Canada Inc. and its subsidiaries Allianz Insurance Company of Canada, group insurer Trafalgar Insurance Company of Canada as well as Canada Brokerlink, a network of insurance brokerages operating in Ontario and Alberta. Allianz will however retain its Canadian industrial lines business, which is part of Allianz Global Risks (AGR). These transactions will be subject to regulatory approvals.

As a result of the acquisition, ING's gross written premiums in Canada will increase by approximately CDN$ 600 million to reach more than CDN$ 4 billion. ING will also expand its network of independent distribution partners. More than 800 employees from Allianz Canada will transfer to ING, which currently has a workforce of more than 5,600 employees across the country. Also involved in the transaction are Canada Brokerlink's 525 employees.

The Allianz acquisition with its portfolio of personal and small to medium commercial lines business reinforces ING's position in its preferred segments of the market. "The acquisition allows us to continue expanding our activities within the P&C insurance industry, especially in Ontario and Alberta", said Claude Dussault, President and Chief Executive Officer of ING Canada. "As we increase the scale of our activities, we will also be in a better position, in collaboration with our distribution partners, to improve our offering of innovative solutions to consumers."

"With its solid performance, ING Canada continues to be the leading provider of P&C insurance in Canada. Its past success and future growth potential were decisive factors in the decision to grow our market share in Canada", said Fred Hubbell, Member of the Executive Board of ING Group and responsible for Insurance Americas.

"This transaction enables Allianz to achieve two objectives. In selling our Canadian personal lines, some of the commercial lines operations and the brokerage business, we stick to our strategy to focus on core business and markets and to reduce complexity. Secondly, retaining the industrial lines operations will allow us to successfully support Canadian and international clients of Allianz Global Risks," explained Jan Carendi, Board Member of Allianz AG, responsible for the Americas.

Amsterdam-based ING Group is a global financial institution offering banking, insurance and asset management to over 60 million private, corporate and institutional clients in more than 50 countries. In Canada, ING is the leading provider of property and casualty insurance with projected premiums of approximately CDN$3.6 billion in 2004. Assets at the end of last year amounted to CDN$7.6 billion. ING Canada offers its insurance products and solutions through ING Insurance, ING Novex, BELAIRdirect and Nordique.

Allianz Group, with its head office in Munich, is present in over 70 countries providing its customers worldwide with a comprehensive range of services in the areas of property and casualty insurance, life and health insurance, asset management and banking. Allianz Canada is the 13th largest property and casualty insurance company in the country with premiums of CDN$898 million and CDN$1.9 billion in assets.

(see headlines)

Edmonton storms could prove costly

July 13, 2004

While claims figures are not yet available for flooding and hail damage in the Edmonton area this past weekend, the storms are likely to prove costly for insurers, says Jim Rivait, vice president of the Prairie region for the Insurance Bureau of Canada (IBC). Rivait notes the weekend weather damage comes on top of storms earlier last week. "We know from last week's storm there were something like 1,400 claims, and the weekend was bigger.

The West Edmonton Mall had a number of businesses damaged, and there were a
number of claims for automobiles with hail damage."Severe rainfall and hail hit Edmonton on Sunday night, with more than 500 homes reporting basement flooding as well as the West Edmonton Mall - the world's largest mall - and major roads being washed out. In its latest Instrat CAT-i Report, Guy Carpenter says about 150 mm of rain fell, triggering flash floods.

This follows more than 350 flooded basements resulting from storms earlier last week, according to an advisory from Edmonton Mayor Bill Smith. He notes cost of repairs to the city's drainage systems from the earlier storms alone is estimated at $750,000.

Sewer back-up is considered "an act of God" and is therefore insurable, meaning that the majority of homeowner losses will be covered by insurance, Rivait explains.

(see headlines)

Ontario’s Finance Minister Greg Sorbara has introduced regulations that will address abuses in towing and damaged vehicle storage, cap fees for Designated Assessment Centres, raise standard collision deductibles to $500 and keep a Liberal government commitment to lowering the price of auto insurance premiums by 10% .

The new towing changes spell good news for collision repair centers and insurance companies who were often abused by uncontrolled prices charged by some tow companies who would not deliver the car for repair unless excessive fees were paid.

“Controls on tow pricing and storage pricing have been requested by repairers and insurers. This new regulation will reduce collision repair costs through lower shop payouts to tow operators and save insurers money that they can use to reduce auto insurance premiums”, says John Norris, Executive Director, of the Hamilton District Autobody Repair Association (HARA).

The provincial government is also planning to limit benefits for those that suffer from lower levels of whiplash injury after an accident as well as reducing expenses for assessment centres by not requiring payment by the centres for the first 50 kilometres of travel by a client for assessment or examination.

The long-awaited promise of lower premiums (by 10%) will take place says the Minister, but may not show on some polices until April 15 as insurers file new rates.

Mark Yakabuski, Ontario Vice-President of the Insurance Bureau of Canada says “Insurers are committed to filing new rates to take into account this announcement. Any savings generated by these measurers will be passed on to consumers.”

(see headlines)

Still, Finance Minister Greg Sorbara is promising that insurance premiums for Ontario drivers will fall by an average of 10 per cent because of these reforms, many of which are set to take effect on policies bought or renewed after April 15.

"We're confident that when the insurance companies have reviewed (the changes), they will -- on average and over and across the industry -- be able to file rates ... that will result in premium reductions of, on average, 10 per cent," Sorbara said yesterday.

Insurance companies have to file new rates with the government by Jan. 23.

During last October's provincial election, the Liberals promised to freeze rates if elected, which they did, and make changes so premium rates fell by 10 per cent within 90 days. However, it will take until April before the rates filed in January are through the approval process, Sorbara said.

Ontario's insurance companies were pleased that the cap on rates would be lifted, and assured consumers that premiums would go down.

"Insurers are committed to filing new rates to take into account (this) announcement. Any savings generated by these measures will be passed on to consumers," said Mark Yakabuski, Ontario vice-president for the Insurance Bureau of Canada.

"There certainly are going to be reductions for most drivers, but the exact level is going to depend on their driving record and other factors," including the financial situation of their insurance company.

The new regulations will:

* Limit tow truck and storage fees to $300, although fees in northern Ontario won't be capped.

* Cap fees for Designated Assessment Centres, which assess accident victims when there's a dispute with the insurance company.

* Change guidelines for the extent and length of care needed for the treatment of soft tissue injuries such as whiplash.

* Limit income replacement benefits and attendant care benefits for those who suffer lower levels of whiplash.

* Not require insurers to pay for the first 50 kilometres of transportation costs to and from examinations or assessments, or treatment, counselling and training sessions, except for those with catastrophic injuries.

* Increase the standard collision deductible to $500.

Critics suggested a number of these changes were put forward by the previous Conservative government in late 2002, such as curbing payouts for treatment of injuries like whiplash.

NDP Leader Howard Hampton said he doubted that Ontario drivers will see a 10 per cent cut in auto insurance premiums.

Insurance companies will make excuses to clients ... "so we can no longer insure you," he said. "They'll have to go out and find a new insurance company, and lo and behold, they'll be paying a rate that's higher than they were paying before. No one is going to see a rate reduction."

The Liberals had said they would scrap the Designated Assessment Centres, not just cap their fees.

Sorbara said that change requires legislation and must wait until the house sits again in late March. The centres will be examined along with other auto insurance reforms as part of a second package of changes to be put forward later this year, he said.

(see headlines)

The Insurance Bureau of Canada, has written to the Canadian Competition Act officials in Ottawa with their comments over the proposed Amendments to the Competition Act. The letter was sent on September 30 of this year as part of an invitation for comments in a public policy discussion.

IBC had four areas of concern with the proposed changes:

IBC felt that provisions for strengthening the civil provisions of the Act, including monetary administrative penalties and a civil cause of action including restitution in respect to deceptive marketing practices was unneeded and that the present processions in the Act were satisfactory.

The insurance association also felt that the reform of the criminal conspiracy provisions in the Act had little benefit and could be misinterpreted. IBC felt that the language use was vague and subjective and might serve to restrict pro-competitive alliances

IBC argues for the de-criminilization of the predatory pricing, promotional allowance and discriminatory pricing provisions in the proposed Act. They question the provisions being included under an “abuse of dominant influence” section of the Act and believe that the introduction of monetary penalties and civil action is a significant departure from the normal process.

The Insurance Bureau of Canada also is worried that a provision to reform the Act to allow the Commissioner to request an independent body to make inquiries into any segment of Canadian marketplace completion may be duplicative and open to abuse by political interest groups.

(see headlines)

(see headlines)

MONTREAL, Oct. 7 /CNW Telbec/ - A survey conducted for the Insurance Bureau of Canada (IBC) clearly shows that Quebecers' support for the reform of the Automobile Insurance Act, as proposed by the government, drops significantly when they become aware of the possible consequences of the plan. With the new legislative session beginning in a few weeks, IBC is releasing the results of the survey.

An analysis of the survey reveals that, while the majority of the population seems to be spontaneously in favour of the changes proposed by the government, perceptions vary greatly when respondents are confronted with specific situations. In order to measure the public's support for the government's plan, cases examples were presented to the respondents.

The results of this exercise are very revealing. For instance, 77% of respondents initially stated that they were in favour of the amendment aimed at cutting off benefits for criminal drivers, but awarded it an average score of 4.5 out of 10 when asked about a specific case. With respect to reinstating the right to sue, the rate of approval dropped from 69% to a score of 4.6 out of 10. Finally, after the persons surveyed learned about three actual cases
concerning the reimbursement by criminal drivers of amounts paid to victims, their support collapsed, falling from 65% to scores of 5 out of 10, 3.9 out of 10 and 5.3 out of 10 respectively for the three cases submitted.

"A review of this data shows that the answers are much more varied when the public becomes aware of the actual implications of the government's plans. This is certainly the reason why respondents feel that the government should provide better compensation to victims (63%) rather than reinstate the right to sue", explains Jacques Valotaire, chairman of IBC Quebec.

Furthermore, when individuals surveyed were told about the possible onsequences of cutting off benefits paid to criminal drivers injured in an accident for which they are responsible, this amendment received the support of 17% of respondents only. A large proportion of Quebecers, i.e. 87%, felt that it should be imperative to hold public hearings before making a final decision on the proposed changes.

The survey also addressed the issue of premium increases. On this issue, 68% of those surveyed felt that the amendments proposed by the government would result in higher automobile insurance premiums. The public's support for the government's plan declines significantly as the percentage of premium increase becomes higher.

The survey provides information on the main factors that would prevent individuals, should they be victims of criminal drivers, from suing them even if they have the right to do so. These factors are in decreasing order: lawyers' fees, long waits, the criminal driver's insolvency and the psychological pain of having to relive the event during the proceedings.

"The survey confirms that, while the public may find the government's intentions commendable, the means used seem inappropriate. We are convinced that once the Quebec people are better informed about the consequences that these changes may bring about, a large majority will want to keep the current no fault system and will oppose the implementation of new judicial proceedings. We hope that the results of this survey will influence the government's thinking in this matter", Mr Valotaire concluded.

The survey was conducted by Impact Recherche, between August 1 and August 19, 2003, and included 1,015 persons over 18 years of age across the province of Quebec. The margin of error is (+/-) 3.1 percentage points, 19 times out of 20. The complete survey may be viewed on the following Web site: www.bac-quebec.qc.ca

(see headlines)

Top 10 Canadian Insurance Frauds of the Year

1. Photo Finish: The man's basement had been flooded causing extensive water damage. The insurance adjuster arrived on the scene and took some pictures for the record. The photos showed a television set, a stereo, and a few bags of clothes that would all have to be replaced. A contractor arrived the next day and he also took some photos before
starting the cleanup. But his pictures told a different story. There were now three television sets instead of one, two stereos -- not one -- and the bags of clothing had multiplied overnight to more than 40. When the adjuster and the contractor compared their photos they told a story worth a thousand words but the insurance company only
needed two. Claim denied.

2. Caught on Tape: It seemed like such a clever plan and an Ottawa man couldn't resist boasting. He was going to arrange for the theft and vandalism of his own car then collect on the insurance. He thought people would be impressed so he told someone, who told someone else who, in turn, told the insurance company what was about to happen.
Surveillance was arranged and the car owner was caught on videotape handing over the keys to a thief. The thief was then seen faking the theft by damaging the ignition system. He also removed the stereo and returned it to the owner. The owner pretended to be upset at his loss when he filed his claim. However, he became genuinely upset when he
was told about the video and charged with fraud.

3. Garden of Greed: The thieves must have been avid gardeners. A woman said they'd cleaned out her garage and she produced a list of the stolen items that included a riding lawnmower, a garden tiller, chainsaws, shovels and whole range of tools. In all, it added up to a $10,000 claim. But she was a little vague about some of the details and descriptions so the adjuster decided to dig a little deeper. Three neighbours told investigators that they had purchased some of the items from the woman. Her ex-husband told them he'd taken some of the tools with him when he left. And finally, it turned out a few of the things on her list never even existed. Following the investigation, the woman called the adjuster and said she wanted to discontinue her claim.

4. Mom and Dad's Idea: A man was going through a messy divorce and decided he needed some friendly female companionship. That's what the ad in the paper promised and apparently delivered. She proved to be a great friend, at least that's what her insurance claim said. She claimed she was helping him home after just meeting him in a bar
because he'd had a little too much to drink. She also claimed she'd never been in his house before and that as she came in the door she didn't see the basement stairs when she tumbled down and broke her leg. She made a claim against the man and his liability insurer. However, the doctor who lived nearby and had come to treat the woman,
told a different story. He said he found her, scantily clad, in a heap at the bottom of the stairs. Other neighbours said they'd seen her at the house before the accident. The man confessed that he'd teamed up with his new friend to file a false claim and defraud his
insurer, adding it was his parent's idea. There's no word on the reaction of his soon-to-be ex-wife.

5. The Copycat: It was a run of the mill accident. A man was moving into his new house when he dropped his television set and it tumbled down the basement stairs. He filed a claim and the insurance company replaced the television with a new one. He was obviously impressed with the prompt and efficient service and he told a co-worker about it. She too was impressed and a little while later her husband called the insurance company to report that he'd dropped his television set and that he'd taken it to the dump. But the scheming couple had the misfortune of dealing with the same adjuster who had handled the other claim. He went to the dump and discovered that the make, model and serial number of their television set were the same as the one in the earlier case. Coincidence? He thought not.

6. Blonde Imagination: Two brothers were camping in the mountains of British Columbia when they ran out of beer. They hopped into their Mustang and roared off to a local tavern to restock. While standing at the counter waiting for their order they bragged to another
customer about how fast they'd made the trip. But on the drive back their luck ran out. The Mustang spun out of control at 150 km/h and crashed into a ditch. The two brothers were thrown out of the car and landed about 50 metres away. When the police arrived, one of the
brothers told them that a blonde was driving the car and she ran away after the accident. The brothers filed insurance claims totaling $1.3 million. Perhaps they were imagining how they would spend it when investigators concluded that the mysterious blonde was also a
product of their imaginations. Claim denied.

7. Just the Fax: She must have been a very shy woman. Or perhaps she was just too distressed by the loss of her $72,000 diamond earrings to talk to the insurance adjuster. Whatever the case, she insisted that all contact with her be made by fax machine. Her husband, however, was a little more forthcoming. He told an investigator he knew
nothing about the earrings, where they came from or where they went. His wife continued to pursue her claim until one day the insurance company received her final fax. It read, "Unless I hear from you shortly, I will expire my file". Her file is now archived in the no
payment section.

8. Goldfingers: The massage therapist had been busy, but an insurance adjuster thought she had been a little too busy. Investigators interviewed more than 40 of her patients and reviewed the bills she had submitted to the insurer. It turned out she was offering a kind
of two for one deal in reverse. The therapist was billing for two massage treatments for every one she actually performed. She was also billing for treating patients while they were out of the country and out of reach. In the end, the massage therapist was touched by the
long arm of the law, ordered to make restitution, pay a fine and perform community service.

9. Transmission Error: A mechanic had suffered a devastating accident. His back and legs were so badly injured that he claimed that he was unable to work. He applied for and received income replacement benefits. For 18 months, the cheques arrived until one day the insurance company received a tip. An investigator armed with a video camera was sent to investigate. Sure enough, the mechanic was seen changing the transmission of a car. A car transmission is a very heavy piece of equipment, however, the mechanic had no difficulty pulling out the old one and lifting a new one into place. When the gavel came down, he was convicted of fraud and ordered to repay almost $17,000 in benefits.

10. Pull the Other One: The injury was real enough. A man's foot had been badly cut and his story seemed plausible. He'd arrived home, he said, and was getting out of his car when a family member accidentally ran over his foot with a lawnmower. He submitted an accident benefit claim to cover medical expenses and lost income. An investigator went
to the man's house and discovered the driveway had high curbs running down both sides. A tape measure and a little math revealed that the man's explanation was impossible unless he had a leg that was ten-feet long. The man withdrew his claim and went back to work
without telling anyone what really happened to his foot.

(see headlines)

The company's decision to close was supposed to conserve enough capital to pay all loss claims and leave enough money to pay refunds on policies terminated early.

That has not happened. About 1,000 refund cheques for an average of $300 each have bounced. A few thousand more refunds are still left owing.

An industry-sponsored protection fund will step in, but will only pay 70 per cent of what's owing to a maximum of $700 per refund.

Nor does Markham have enough money to pay all loss claims. The protection fund will cover losses up to $250,000, but that won't be enough for a few businesses such as restaurants who had losses.

Finally, settlement of claims for statutory accident benefits for motor vehicle injuries has been hampered because Ontario legislators never fixed a problem identified when Maplex General Insurance Co. failed in 1995.

No clear mechanism is in place for dividing the cost of paying victims these benefits among all insurers in Ontario, where Markham obtained most of its sales.

"This is messy," says Alex Kennedy, president of the Property and Casualty Insurance Compensation Corp., or PACICC. "It's something, that by this time, should have been handled."

Repeatedly after Maplex failed, Kennedy warned Ontario ministers and parliamentary assistants responsible for insurance that the government would face embarrassment if a sharing mechanism was not put in place before the next insolvency.

Markham General grew rapidly in the past two years, spurred by low premiums and the endorsement that hockey commentator Don Cherry gave to Markham's largest broker, Believer Plus Insurance Brokers Ltd. of Hamilton.

But when Markham could not find additional capital to fund its growth and deal with the need to raise its low premiums, regulators nudged the insurer to close as of June 15.

The Financial Services Commission of Ontario had to go further on July 24. It went to court to enforce an orderly wind-up of the business, and name Deloitte and Touche Inc. as the liquidator.

It is too early to estimate the size of shortfall at Markham, which relied heavily on international reinsurers to support its business, said John Whitehead of Deloitte. "If the reinsurance holds good, there is a chance we will have a good deal of money to pay to policyholders and (reimburse the compensation fund), but probably not enough to supplement partial refunds of unearned premiums."

The liquidator has the money and authority to continue paying accident benefits to victims of motor vehicle injuries until mid-September. At that point, the liquidator and PACICC will need guidance from a judge on how to pass on any shortfall in future benefits to other insurers — to individual companies where the victims may also have coverage or on a fairer basis to the entire industry.

Industry executives have been critical of the Financial Services Commission for not acting sooner to avert a train wreck at Markham. They noted in April that Markham's premiums were so low that many of its dislodged policyholders could see increases of more than 20 per cent when they switched companies.

In a few cases, policyholders never received notice or read press reports to learn that their policies were about to be cancelled. "One gentleman was horrified to learn he had been driving for a month without coverage," Kennedy said in an interview.

Mutual fund returns: Most investors in well diversified Canadian equity funds have not been hit as hard as the Toronto stock market, as I wrote last Tuesday. But, due to an error loading software, I reported March figures instead of July's as intended. So here is an update.

To the end of July, not one in eight funds had dropped as much as the over-all market, which was down 36 per cent in a two-year period. The weighted average loss for investors was 10.6 per cent, and only 5.2 per cent for those invested in funds with more than $1 billion in assets.

Only a fifth of funds made money, though, compared with a half to the end of March. Large funds like CI Harbour had an average annual gain of 7.5 per cent, Trimark Canadian Endeavour 7.4 per cent, Investors Canadian Large Cap Value 5.2 per cent and Trimark Canadian 1.6 per cent.

Among global funds — the ones that many hapless investors were urged to buy with borrowed money — the results were worse by July than in the March figures. Half of funds lost more than a third of their value in a two-year period, while the average investor lost 14.7 per cent.

Results will be different again when fund holders get their end-of-August figures. The Toronto market peaked during that month two years ago.

Thanks to the Toronto Star www.thestar.com

(see headlines)

8/12/2002

British Columbia's public insurer is reporting increased profits for the quarter ending June 30, 2002, largely the result of changes to its investment portfolio. The Insurance Corporation of B.C. (ICBC) saw a net profit of $39.6 million for the second quarter of this year, compared to $8.5 million profit for the same period in 2001. The result is net income for the first six months of the year of $9.2 million, versus a net loss of $30.6 million at the same point last year.
Total premiums written were up 12% to $730 million for the most recent quarter, from $651 million for the second quarter of 2001. However, insurance operations saw an underwriting loss of $67 million, against a loss of $75 million last year during the same time.
Claims costs continue to rise, the corporation reports, up to $632 million for the quarter, from $571 million in Q-2 2001. "The rising trend in claims continues to be a major concern for the Corporation," states a release. "This year has seen a continuing increase in both the frequency and severity of crashes and at the same time, car thefts have increased 14% over last year."
Gains came from the investment side, with investment income up to $129 million versus $107 million for the second quarter last year. ICBC outsourced the management of its Canadian equities portfolio, and linked that portfolio to the S&P/TSX Composite Index during this most recent quarter. "The adjustment of the portfolio to the Index resulted in the disposition of a number of holdings and was responsible for most of the exceptionally high gains on sale of investments in the quarter."
As a result, about $30 million of the gains budgeted to be achieved in the second half of 2002 have already occurred.

(Thanks to CanadianUnderwriter)

(see headlines)

July 22, 2002

The Financial Services Commission of Ontario (FSCO) has issued notice that the regulator will take possession of the assets of troubled insurer, Markham General Insurance Co. The insurer recently cancelled active policies and ceased writing new business.
FSCO says its action against Markham had followed close monitoring of the company's financial affairs, and after having been supplied by financial records from the board of directors, it became apparent that the assets were insufficient to warrant the insurer remaining in business. "The superintendent took this action to protect policyholders because Markham General Insurance Co. could no longer meet its obligations." FSCO observes that policyholders will receive some protection of their interests through the insurance industry's Property and Casualty Insurance Compensation Corp. (PACICC).

from Canadian Underwriter www.canadianunderwriter.ca

(see headlines)

Steve Arnold
The Hamilton Spectator

More than 12,000 Hamilton residents are scrambling to find new car and business insurance after the provincial regulator asked their company to cancel all outstanding policies. Policies of Markham General Insurance Co. were sold by a number of brokers, including the much-advertised Believer Plus. Markham General was asked to go out of business by the Financial Services Commission of Ontario because its cash reserves fell below legal requirements.
Across the province, as many as 80,000 policyholders could be affected.

Industry watchers warn that other insurers may also go under, victims of a wave of turmoil in the insurance business.

Hardest hit by the Markham General decision is Hamilton-based Believer Plus, a company pitched in a series of radio advertisements by colourful hockey commentator Don Cherry. It has 10,000 customers who must now be placed with new insurers, most at higher premiums.

"It's a real problem, but it isn't a problem that we won't be able to overcome," said John Mitchell, of Mitchell and Abbott Group of brokers which includes Believer Plus. "This is something we may see in the industry again before the end of the year."

Markham sold policies through a network of 80 brokers across Ontario, including Mitchell's groups, Dalton Timmis Insurance of Hamilton and Tripemco Insurance of Burlington. Among them, they sold more than 12,000 of the company's low-priced auto policies targeted to good drivers.

Those policies will stay in effect until June 15. Policyholders will have to find new insurance, which shouldn't be a problem, but most will face premiums hikes of as much as 15 per cent.

They will also be reimbursed for payments made for coverage beyond June 15.

Mitchell explained that its low premiums may have been one of Markham's major problems -- the $83 million in premiums it brought in simply wasn't enough to cover claims and maintain the roughly 30 per cent of total policy value it's required to have in liquid assets. Industry sources say Believer Plus alone accounted for roughly $14 million of Markham's premiums last year.

The problem of inadequate rates was aggravated by the stock market slump, which meant the company's investments didn't make up the difference. Some industry experts are blaming provincial regulators and politicians for not changing Ontario's mandatory insurance to help curb the soaring cost of medical treatments for minor injuries, and to speed up approval of rate increases.

Trouble became a crisis, however, in the wake of the Sept. 11 terrorist attacks when insurance companies were hammered by a double blow -- the firms that insure insurance companies against major losses suddenly cut the amounts they would cover and drastically increased the fees they charged.

It works like this. If an insurance company writes a policy for $1 million, it only covers the first $100,000 of the loss and buys re-insurance to cover the balance.

Since Sept. 11 however, premiums for that secondary coverage have tripled and the maximum amounts covered have been slashed.

The damage all those factors did to the balance sheets and bottom lines of insurance firms means more could soon follow Markham out of the business, Mitchell said.

"I don't believe we've seen the end of this sort of thing," he said. "We may see something like this again before the end of the year."

Rowena McDougall, spokesperson for the Financial Services Commission of Ontario, said Markham General is voluntarily cancelling all its business, auto and home insurance policies after a quarterly report filed in February showed it didn't have the required amount of cash on hand.

"Markham came to us and we started working with them as soon as we realized there was a problem," she said. "We consider this a very successful resolution of the problem."

McDougall said after the cash shortfall was discovered, the company was asked to stop writing new policies and was given one month to find new capital. When that search failed, it was asked to shut down.

Until Believer's current policy holders are placed with new coverage, Mitchell said listeners won't be hearing any more of Cherry's commercials. But they will be back, selling policies from a new insurance company.

"We have to take care of our current clientele. We can't even think about writing any new business," he said.

Markham General says it still has enough money to make pro rata refunds for policies cancelled mid-term and to pay claims for wrecks and injuries.

Ken Watson, an interim manager parachuted in by the insurer's principal financial backer, said Dailey Capital Management Inc. of South Port, Conn., will stick around to keep things going until policies are cancelled. It's also possible the company will be revived.

"We are trying to resurrect the business in terms of recapitalizing it," said Watson.

Thousands of other drivers were already being moved around after Zurich Insurance sold its personal lines business in Canada to ING Group NV, and clients of CGU Insurance Co. of Canada were transferred to its sister Pilot Insurance Co.

You can contact Steve Arnold at sarnold@hamiltonspectator.com or at 905-526-3496.
(article courtesy Hamilton Sepctator)

www.thehamiltonspectator.com

(see headlines)

Auto Repair Perspective: Work For, Not Against

By John Norris, executive director of the Hamilton District Autobody Repair Association

The world of repair shops and front-line collision damage appraisers is very different to that of the corporate insurance industry. A closer understanding of the challenges faced by both sides is clearly needed. In fact, with both bodyshops and insurers facing extremely tight operating margins in the highly competitive auto repair market, it can only make sense that both the body shop owner and insurer should work together rather than against each other.

Insurers who pay for repair and refinish of collision damaged vehicles expect a seamless claims process. Insurers talk about a quality claims experience for their clients, with the expectation that the client will be so pleased with the claims and repair process that he/she will be eager to reinsure with their company.

Collision shop owner/managers repair vehicles for their customers -- the car owner. The insurer however, pays the bills. The shop owner wants a happy customer too. After all, a happy customer means a life-long client who often helps form decisions for others on what shop to use. Over 70% of a repair shop's business is derived from referrals. Good recommendations of a shop to a potential customer from brokers, suppliers, friends and relatives is the largest source of income, so they too want a seamless repair with no hassles or delays.

So, if everyone wants the same end result, namely a happy client and a seamless repair process, then why do shops call me and vent their frustrations on how they are unable to achieve that end due to purported "roadblocks" put in their way by insurers? And, why do insurers call me and complain that repair shop are not co-operating?

Despite upbeat speeches at conferences and wonderfully warm public ads to win new clients, both collision repair shops and insurers often alienate customers in the claims handling aspect of vehicle repairs. The following is a list of the top ten complaints received by my office. I have also provided my thoughts on what can be done to solve these issues:

Am I getting OEM parts right? With the continuing negative publicity of aftermarket part lawsuits, an increasing number of customers are asking for original manufacturers' parts. In addition to which, shop owners do not like aftermarket products as they often fit poorly and take an average 33% longer to install, resulting in vehicle return delays. On the other hand, insurers like aftermarket parts because they are cheaper. But, remember, this means longer delivery cycles resulting in a dissatisfied customer and higher rental car costs.

What do you mean it will take seven days for an appraiser to show up? Customers are often referred to bodyshops by relatives, dealerships and brokers. However, when dealing with an insurance company representative, they are told that if they go to the shop of their choice rather than the insurer-preferred shop, then they will have to wait for an appraiser to evaluate the damage before the repairs can be made. This is not a good way to build customer loyalty nor bring about time efficiency.

You want the rental car back in seven days too? Insurers have every reason to want to restrict car rental costs. However, badgering the client will not help achieve that end. Please recognize that the repair shop does not have staff waiting to pounce on the repair and start the moment the damaged car arrives. Neither are those parts that are needed (or even worse, back-ordered) going to be there when the car rolls in. Rather, improved communications between repair shop, customer and the insurer would help. A new twist is to link the rental into the shops promised repair date. Some shops will recognize the extra costs an insurer bears and will cover them if a delivery delay is the shop's fault

We will not guarantee the work at that shop. It is the repair shop that guarantees the work, not the insurer. Many shops find these comments by insurers, intent on sending clients to their own contracted shops, as demeaning and untrue. It is, however, fair to advise your customer of specifics of the warranty at the shop that they wish to use.

The insurer wants to remove my car to one of their own shops. Well, there goes the cycle time, cost control and customer satisfaction rating. By the time the insurer pays for the extra tow, the double estimate fees, the double "tear down costs" and possible additional parts fees -- the repair costs have escalated tremendously. Insurers would be smarter to leave the car where it is.

The shop told me my car would be ready in two weeks. Shops must do a better job of keeping their commitments to delivery time, and, if there are changes, then let the broker/insurer and customer know in advance. Repair shops would win "extra brownie points" with insurers and customers if they guaranteed their commitment to delivery time. Some shops may even offer to cover rental costs if they are at fault in not keeping to delivery times.

The insurer is sending someone to the shop to replace the windshield. The non-trades certified mobile glass installer (who may have been a laid-off steelworker last week) arrives at a repair shop to use the power, heat, space, and move cars around and at the end, perhaps safely install a windshield after the car is almost completed and delicately painted. The shop does not get to bill anyone, the customer or the insurer, for the work as the glass company directs its bills the insurer. Who is liable when the customer is ejected from the car along with the improperly installed windshield in the next accident? You bet, the shop owner. After the ABC newsmagazine show 20/20 ran a segment that quoted an installer saying that half of the windshields installed in the U.S. were done improperly, the calls to shops escalated on this issue. Make sure that the glass installer is either trade-certified or has taken an approved training course. Insurers and repair shops can lose significant amounts of money if these recommendations are not followed -- look at the litigation tort awards running into several millions of dollars occurring south of the border.

The insurer wants to put a used airbag in my car. Insurers should not use them. All major car manufacturers recommend against used airbags. News stories persist of used airbag suppliers being linked to using stolen goods. This is a liability that neither the repair shop or the insurer needs. One insurer advised me that they will offer their insurance company's lifetime warranty on installed used airbags as long as a qualified technician installed it -- the problem is that the company in question could not find a technician to accept the liability.

Why is the insurer telling me to void my new car warranty. How many clients are thrilled to be told by their insurer that their new car warranty is to be terminated for an insurer's warranty? The expression on their faces is shock. Insurers should re-think their attempts to void OEM warranties. This is particularly true with leased cars where the insurer demands aftermarket parts be installed with an insurer's warranty. Once the car goes off-lease, is the insurer going to pay the $1500 penalty that one client was assessed by his dealer because non-OEM parts were used?

My paint cost me $400 to buy, but the insurer will only pay $350. The cost of paint to shops has gone up over 70% in the last ten years. Putting an arbitrary "cap" on the insured cost is unrealistic. A double-wheeled, 4x4 crew cab takes a lot more paint than a Neon, yet insurers cap the same price. Have the appraisers at your insurance company take some basic auto refinishing training. The end result will be a more skilled employee, and ultimately a more satisfied customer. Is that not what we all want?

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CLAIMING FOR DAMAGE TO YOUR AUTOMOBILE

In Ontario, you claim for damage to your vehicle from your own insurance company. What you recover will depend on several things:

in the case of a car accident, whether you were at fault or partially at fault;

what optional insurance coverage you carry for your vehicle;

what the actual cash value of your vehicle was at the time of the accident.

This information sheet describes terms such as actual cash value, and describes how your right to claim varies with your coverage.

Claiming with mandatory coverage only

In Ontario, your mandatory coverage includes Direct Compensation-Property Damage, which means that if your vehicle is damaged in an accident, you may recover directly from your own insurance company - to the extent that you are not at fault - for the damage to your vehicle, its contents and loss of use, less any deductible you arranged with your insurance company. For example, if you were 75% at fault for the accident - and therefore 25% not at fault - your company will pay 25% of your loss, less any deductible under Direct Compensation-Property Damage.

Under a Direct Compensation-Property Damage claim, you can, to the extent you're not at fault, recover for damage to the vehicle, the cost of a temporary rental vehicle (transportation replacement coverage) and for damaged personal contents carried in the car. Contents carried for sale or delivery are not covered.

If your accident is with a car from outside Ontario, Direct Compensation-Property Damage does not apply unless the insurer of the out-of-province car has signed an agreement with Ontario to settle claims under the Direct Compensation-Property Damage rules. If an agreement does not exist, you will have to sue the out-of-province vehicle owner and the driver to recover your loss. Your insurance company will know if the out-of-province insurance company has signed an agreement.

If your accident is with a vehicle that is uninsured, you claim under the mandatory uninsured motorist coverage of your policy. If you claim under this coverage, you must be able to identify the other vehicle involved in the accident, and you will be covered for damage to your vehicle and contents up to $25,000, less the first $300 of the loss.

Claiming with mandatory plus optional coverage

If you purchased optional Collision coverage you may recover from your insurance company for damage to your vehicle caused by collision or upset, regardless of fault, less the deductible you chose at the time you purchased the coverage. Coverage for transportation replacement is not normally covered under the Collision coverage.

If your vehicle is hit while parked and the responsible party does not remain at the accident scene and cannot be identified, you will be reimbursed for the repair costs only if your policy includes Collision coverage.

Comprehensive coverage is the other popular optional coverage for loss or damage to your vehicle. It covers losses that are not covered by collision, such as theft, vandalism or fire. Your agent or broker can advise you on the full range of optional coverages.

Making a claim

To find out if you have particular coverage for a specific automobile, check your certificate of automobile insurance to see if it lists a premium paid for that coverage, or shows that the coverage is provided at no cost. Your policy itself explains many details about your insurance, your rights, and how your company and you can work together. If you do not have a copy of your policy, ask your insurance agent, broker or company for one.

If you have a motor vehicle accident and are making a claim, your company will want a written notice within seven days describing the accident and the damage to the vehicle and property. Do not remove evidence of damage or repair the car before your company has had a chance to inspect the vehicle, verify the damage and estimate the cost of repairs.

Insurance companies often make payments to both you and the garage or shop where the car is repaired; you should not have to pre-pay. Be sure you and your insurance company agree in advance about what repairs will be made and who will pay for them. As far as replacement parts are concerned, the company is within its rights to repair an insured car using parts the same age and condition as the car itself. Car owners are responsible for repair costs that improve the vehicle beyond its pre-accident state.

Deductible

You can expect to pay your full deductible unless the accident was not your fault or was only partially your fault. For example, where an accident is 25% your fault, you will be covered by Direct Compensation-Property Damage for the 75% that you were not at fault.

Since Collision coverage will apply only to the remaining 25%, you are responsible for 25% of the deductible.

Actual cash value

Insurance companies set the value of most vehicles at the time of the accident. They call this actual cash value (ACV) and base the amount largely on the average retail selling price of cars in your region of the same age, make, model and condition.

Companies use actual cash value to decide whether to treat your car as a total loss or whether to repair it. The amount you receive if your car is a total loss (actual cash value, less deductible, with the company assuming ownership of the car) may not be what you consider the real value. One place to look for comparable values is the Red Book used to determine sales tax on used cars. Your community library will have a current copy and you should use it to check the retail cost column.

Fault Determination Rules

Insurance companies must use the Fault Determination Rules from the Insurance Act in assessing the percentage of fault after an accident. If you disagree with the way your company has assessed the degree of fault, you can argue the decision in court; the Act specifies that the court can adjust fault according to ordinary rules of law.

What happens to your insurance premium when you make a claim?

If the accident is determined not to be your fault, your insurance rating should not be affected. If you are found at fault for any percentage of the accident, your premium may increase

What are Collision Reporting Centres?

Some jurisdictions have Collision Reporting Centres. If you are involved in a minor accident in one of these jurisdictions and there are no injuries, the police require that drivers attend one of these reporting centre with their vehicles. At the reporting centre, the drivers complete accident reports and in some cases, all the important information is sent to the insurance companies involved in order to start the adjusting of the claim.

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